A study out this month from the Center for Responsible Lending (CRL) says that the Credit Card Accountability Responsibility and Disclosure Act has largely put an end to problematic practices by credit card issuers.
The legislation addressed policies and procedures that were perceived as unfair and deceptive to consumers. The law was signed by President Obama in May 2009. Issues like marketing credit cards to minors, raising interest rates without notice, and imposing penalty rates and fees were all included in the reform.
Regulations that were put into place by the CARD Act include:
- Interest rates cannot be raised unless cardholders are 60 days overdue
- Penalty rates revert to the original rate after six months of consecutive on-time payments
- Payments above the minimum must be applied to the balance with the highest interest rate
- Cardholders must be notified 45 days before changes to credit card terms
- Fees must be less than 25% of the credit limit during the first year of a new credit card account
As a result of these and other changes, the CRL says that credit card pricing is clearer and consumers are managing credit better because of the transparency on fees. Highlights of the CRL’s report:
- Two-thirds of consumers had a credit card in 2010, but less than 40% carried balances on them
- Credit card balances decreased by 16% between 2007 and 2010
- There are fewer differences now between rates in credit card marketing materials and rates charged
Credit card debt in America totals over $854 billion, according to the report. The biggest issuers of credit cards are Citi, Chase, Bank of America, Capital One and American Express, with total portfolios of $475 billion which represents more than half of the credit card market.